Monday, November 24, 2014

Shiller Peddles Horseshit

Robert Shiller appears to be in on the con:

"This is one of the messages of my financial markets course," Shiller said. "There's an important technology that finance represents, and it is the technology of financing that people can undertake activities that would have otherwise been too risky for them."
"Finance and insurance are about an uncertain future," Shiller said. "It's about managing it, sharing your risks, hedging your risks. People forget that.
Finance is not a technology.  It's a heads-I-win-tails-you-lose grift.  And to the extent it pretends to manage risk, it does not actually factor in uncertainty, which is a different beast.  That's what makes the "risk managing" nature of financial "products" such a farce: they mask the risk of unknown unknowns and thus magnify risk, not mitigate it.

If the FIRE sector actually managed and/or mitigated risk, not a single FIRE institution would be Too Big To Fail.